Valeant Update (03.15.2016)

Valeant Update

 

We have written two previous blog posts on Valeant:

From the time of our first post on July 24th, the company has lost over 75% of its market value and over $75 billion dollars of investor capital.  Unfortunately, they are not in the clear. The Valeant balance sheet has looked the same since the July 24th blog – a very heavy debt load exists at the company, and debt is nearly 3 times revenue. Their business model is now threatened via potential regulation changes, and the cash-flow cannot be modeled; this kind of uncertainty makes it very difficult for a stock to rally. We wish them luck – we have never invested in this company, nor plan on doing so.

 

(Source: Bloomberg)

 

From the time of the first blog post, Valeant has dropped from $260 to $55.  Royal Bank has since produced record earnings and a dividend increase. Its stock has not done too much to brag about, but there were no surprises – we like that.

 

RBC (white) vs. Valeant (green):

(Source: Bloomberg)

 

Further detail on Valeant's situation via Financial Post 

 

Common sense is everything; if a company has lower revenue than Royal Bank has net income, steer clear and wait for cooler heads to prevail.

 

Any questions, give us a call.

Chris, Rick, Steve

416-572-5429

 

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